If you're shopping for car insurance in New Jersey, you've probably noticed something unusual: you have to choose between a "Basic Policy" and a "Standard Policy." Most states don't make you pick—they just have one set of minimum requirements. But New Jersey does things differently, and understanding this choice could save you thousands of dollars if you're ever in an accident.
Here's what trips people up: the Basic Policy is cheaper—sometimes significantly cheaper—but it comes with serious limitations that most drivers don't discover until it's too late. Let's break down what New Jersey actually requires, what the two policy types really mean for your wallet and your protection, and which option makes sense for your situation.
New Jersey's Two-Tier Insurance System
New Jersey created the Basic Policy option in the 1990s to provide a lower-cost insurance option for drivers who were struggling with high premiums. The idea was simple: if you're willing to accept less coverage and give up some legal rights, you can pay less. But that trade-off comes with real consequences.
With a Basic Policy, you get the absolute minimum coverage New Jersey allows: $15,000 per person and $30,000 per accident for bodily injury liability, plus $5,000 for property damage liability. You also get $15,000 in Personal Injury Protection (PIP) to cover your own medical bills. That might sound like enough—until you consider that the average car accident with injuries costs over $50,000, and a new car can easily exceed $40,000.
The Standard Policy gives you higher minimums—typically $25,000/$50,000 for bodily injury and $25,000 for property damage—but more importantly, it includes uninsured motorist coverage and gives you full rights to sue for pain and suffering after an accident. About 85% of New Jersey drivers choose the Standard Policy because the extra protection is worth the slightly higher premium.
What Basic Policy Actually Covers (And What It Doesn't)
Let's get specific about what you're getting with a Basic Policy. The bodily injury liability coverage pays for injuries you cause to other people—up to $15,000 per person or $30,000 total if multiple people are hurt. If you rear-end someone and they need surgery that costs $35,000, your insurance covers the first $15,000, and you're personally responsible for the remaining $20,000. They can sue you for it, garnish your wages, or put a lien on your house.
The $5,000 property damage limit is even more problematic. If you hit a Tesla Model 3 (average repair cost: $7,000 for a moderate collision), your insurance pays $5,000, and you owe $2,000 out of pocket. Total a luxury SUV? You could be on the hook for $30,000 or more beyond what your policy covers.
Here's what really catches people off guard: Basic Policies don't include uninsured motorist coverage. In New Jersey, about 14% of drivers are uninsured. If one of them hits you and you have a Basic Policy, you're relying entirely on your $15,000 PIP coverage for medical bills—and nothing else. Your car damage? Your lost wages beyond what PIP covers? Your pain and suffering? You're out of luck unless you want to try collecting from someone who couldn't afford insurance in the first place.
The Lawsuit Limitation You Need to Understand
This is the big one that most people don't realize until it's too late. When you choose a Basic Policy, you agree to something called the "limitation on lawsuit option." In plain English, you give up your right to sue for pain and suffering unless your injuries are really serious—think permanent disfigurement, significant permanent injury, or a broken bone.
What does this mean in practice? Say you're rear-ended and develop chronic back pain. You miss three weeks of work, spend six months in physical therapy, and can't play with your kids without discomfort. Under a Standard Policy, you could sue the at-fault driver for pain and suffering and potentially recover tens of thousands of dollars. Under a Basic Policy, you can't—your injuries don't meet the legal threshold. You get your medical bills paid through PIP and that's it.
Standard Policy holders retain their full right to sue. Any injury caused by another driver—even whiplash or soft tissue damage—gives you the legal right to pursue compensation for pain, suffering, and other non-economic damages. For most people, this protection alone justifies the extra $10-30 per month that Standard Policies typically cost.
Understanding Personal Injury Protection (PIP)
Both Basic and Standard policies in New Jersey include Personal Injury Protection, and this is actually one of the better features of the state's insurance system. PIP is "no-fault" coverage, which means it pays your medical bills, lost wages, and essential services (like someone to mow your lawn if you're injured) regardless of who caused the accident. No waiting for the other driver's insurance to accept liability, no fighting over fault—you file a claim with your own insurance and get paid.
The minimum PIP coverage is $15,000, but you can—and probably should—increase it. That $15,000 has to cover medical bills, 75% of your lost income, and $12 per day for essential services. If you earn $60,000 a year and miss a month of work, that's $3,750 in lost wages right there. Add a few ER visits, an MRI, and physical therapy, and you could blow through $15,000 pretty quickly.
Many insurers offer PIP limits of $50,000, $75,000, or even $250,000, and the premium increase is usually modest. If you have good health insurance with low deductibles, you might be fine with the minimum. But if your health plan has a $5,000 deductible and limited coverage, higher PIP limits make sense.
Which Policy Type Is Right for You?
Let's be honest: for most drivers, the Standard Policy is the better choice. The Basic Policy saves you money upfront, but it exposes you to serious financial risk. Unless you're in a very tight financial situation where every dollar counts, the extra $120-400 per year for a Standard Policy is a worthwhile investment.
Consider the Standard Policy essential if you: own assets like a home or significant savings that you want to protect from lawsuits; drive frequently in high-traffic areas where accidents are more likely; have a family relying on your income; or want the peace of mind that comes with comprehensive protection.
The Basic Policy might work if you: are genuinely struggling financially and the premium difference is make-or-break; drive very infrequently; don't own a car and only need insurance to comply with SR-22 requirements; or have substantial assets and are self-insuring for most risks. But even then, most financial advisors would tell you to find the money for better coverage rather than risk devastating out-of-pocket costs.
Beyond the Minimums: What You Should Actually Carry
Even if you choose the Standard Policy, the state minimums aren't really enough. Most insurance agents recommend at least $100,000 per person and $300,000 per accident for bodily injury liability—sometimes called 100/300/100 coverage when you include $100,000 in property damage. Why? Because if you cause a serious accident, $25,000 or $50,000 won't come close to covering the damages, and the victim can come after your personal assets.
The good news? Increasing your liability limits is surprisingly affordable. Going from 25/50/25 to 100/300/100 might only add $100-200 per year to your premium. If you have significant assets—a home with equity, retirement accounts, investment properties—you should also consider an umbrella policy that adds another $1-2 million in liability coverage for around $200-400 annually.
How to Get the Right Coverage at the Best Price
Shopping for car insurance in New Jersey means getting quotes from multiple carriers and comparing both the coverage and the price. Rates vary wildly—the same coverage might cost $1,200 from one insurer and $1,800 from another—so it pays to shop around. Start by deciding whether you want Basic or Standard coverage (again, Standard is almost always worth it), then determine your liability limits and PIP coverage.
When you're comparing quotes, make sure you're comparing identical coverage—same liability limits, same PIP coverage, same deductibles. Look for discounts you might qualify for: good driver discounts, multi-policy discounts if you bundle with homeowners or renters insurance, good student discounts for young drivers, or discounts for taking a defensive driving course.
Most importantly, don't just pick the cheapest policy. The insurer's reputation for claims handling matters. You don't want to save $200 per year only to deal with an insurer that drags its feet and lowballs claims when you actually need them. Check customer reviews, complaint ratios with the state insurance department, and financial strength ratings before you buy.
New Jersey's two-tier insurance system gives you a choice, but for most drivers, it's not really a difficult decision. The Standard Policy provides the protection you actually need at a price that's only slightly higher than the bare-bones Basic Policy. Yes, you can save money with the Basic option—but when an accident happens, that savings can evaporate in an instant, leaving you exposed to financial risks that could take years to recover from. Choose coverage that protects your assets, your income, and your future, not just the cheapest policy that meets the legal minimum.
